Operator: To access the slides accompanying today's call, please visit AB InBev's website at www.ab-inbev.com and click on the Investors tab and the Reports and Results Center page. Today's webcast will be available for on-demand playback later today. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your touch-tone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. If you should require operator assistance, please press star zero. Some of the information provided during the conference call may contain statements of future expectations and other forward-looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties.
Operator: It's possible that AB InBev's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect AB InBev's future results, see risk factors in the company's latest annual report on Form 20-F, filed with the Securities and Exchange Commission on 03 May 2026. AB InBev assumes no obligation to update or revise any forward-looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information. It is now my pleasure to turn the floor over to Mr. Michel Doukeris. Sir, you may begin.
Michel Doukeris: Thank you. Welcome everyone to our Q3 2026 earnings call. Today, Fernando and I will take you through our operating highlights and provide you with an update on the progress we have made in executing our strategic priorities. After that, we'll be happy to answer your questions. Let's start with the key highlights. The momentum of our business continued in the third quarter. Consistent execution of our strategy enabled us to deliver solid top and bottom-line performance while investing in our brands and capabilities to fuel future growth. Volumes grew for a third consecutive quarter, with market share growth globally and record high third quarter volumes in 15 markets, including Colombia, Peru, Ecuador, South Africa, India, and Dominican Republic, amongst others. Revenue increased by 4.9% with solid revenue per hectolitre growth of 4.2%. Underlying EPS increased by 22% to reach $1.21.
Michel Doukeris: We stepped up sales and marketing investments to activate key mega platforms this quarter, strengthening our brand power and supporting increased participation with our portfolio. Our performance was driven by our replicable growth drivers with continued momentum across our mega brands, non-alcohol beer, and Beyond Beer. BEES Marketplace continued to scale, with GMV increasing by 45% to reach $1.4 billion. Given our strong balance sheet and increased capital allocation flexibility, the board has approved an interim dividend of EUR 0.40 per share. Turning to our operating performance. Total volumes grew by 0.4% in the third quarter, led by growth in our soft drinks business. Beer volumes were flattish as growth in two-thirds of our markets was offset by a challenging industry in China. Our best-in-class revenue management capabilities, combined with positive mix contribution from our mega brands, delivered a revenue per hectolitre increase of 4.2%.
Michel Doukeris: EBITDA increased by 3.9% with flattish margins, as higher sales and market investments and commodity headwinds were partially offset by disciplined revenue and cost management. USD EBITDA increases by 6.5% in the third quarter and by 10% year to date. EBIT increased by 6% and underlying EPS grew by 22% as we continued to optimize the business and drove operating leverage through the P&L. Our geographic footprint and global scale continue to enable us to deliver consistent results across different operating environments. Our footprint is both well-diversified and balanced, with around 70% of our EBITDA generated in emerging and developing markets. We are well-positioned to capture future industry growth with a mix of currencies. Now, let's review our key regional highlights, starting with North America. In the US, our portfolio momentum continued with share gains in both beer and Beyond Beer.
Michel Doukeris: We have gained share of total alcohol for 10 consecutive quarters and are the number 1 share gainer year to date. Our beer performance was led by Michelob ULTRA and Busch Light, which were the top 2 volume share gainers in the industry. Our Beyond Beer portfolio continued to expand our total addressable market and delivered revenue growth in the low teens, led by Cutwater and NÜTRL. Now let's turn to Middle Americas. In Mexico, market share gain and margin expansion drove mid-single digit volume growth and double-digit bottom-line growth. We grew revenue in mainstream, premium, non-alcohol beer, and Beyond Beer, and continue to increase our portfolio brand power. In Colombia, record high third quarter volumes drove double-digit top and bottom line growth. Volume and revenue grew across all price segments with our portfolio gaining share of alcohol beverage.
Michel Doukeris: In Brazil, market share momentum and volume growth drove a mid-single digit top and bottom line increase. Our premium and super premium beer portfolio led our performance and delivered high teens volume growth in strengthening our leadership position in the segment. In Europe, market share gains and premiumization drove continued top-line growth. Volumes were flat, estimated to have gained or maintained share in a majority of our key markets. With our performance driven by our mega brands and non-alcohol beer. In South Africa, record high volumes and premiumization drove high single-digit top-line growth. Our premium beer portfolio led our performance, delivering mid-thirties volume growth. Now moving to APAC. In China, revenue and volumes declined by 16.8% as we underperformed a challenging industry. We estimate the industry declined by low teens in our footprint, impacted by abnormal weather and continued weakness in the on-premise channel.
Michel Doukeris: While our overall results remained below potential, we made progress in areas of strategic focus. We continued to invest in our mega brands, innovations, and strengthen our portfolio brand power. Our in-home channel market share trend improved versus last year, supported by continued momentum in our core plus and super premium brands, and growth in the O2O channel. There is more work to do and we are investing to improve our execution and rebalance our portfolio towards growing segments, channels, and geographies. Let's now turn to our strategic pillars, starting with lead and grow the category. Our mega brands continue to drive profitable growth across our markets, with net revenue increasing by 7.7% during the quarter. Corona continued to drive premiumization, growing revenue by 20% outside of Mexico, and growing volumes by double digits in 37 markets.
Michel Doukeris: The combination of our mega brands and platforms is a powerful opportunity to connect with consumers through key moments of culture and celebration. Following successful activations in the first 9 months of the year, we have a strong lineup for Q4 and into 2027. These mega platforms, including our partnerships with Live Nation and Netflix, are placing beer and our brands at the center of culturally relevant moments for consumers. Our strategic investments strengthened the connection with consumers and supported a continued increase in our portfolio brand power. Consistent execution of our category expansion levers drove increased consumer participation with our portfolio this quarter, with growth across our core, premium, balanced choices, and Beyond Beer brands. In non-alcohol beer, our portfolio outperformed the industry and delivered a 35% revenue increase, led by Corona Cero and Michelob ULTRA Zero.
Michel Doukeris: With an estimated 60% of the volume coming from new occasions and new consumers, no alcohol beer is an opportunity to develop the category and drive incremental volume growth. Let's now turn to our second strategic pillar, digitize and monetize our ecosystem. In the third quarter, this captured $15.9 billion in gross merchandising value, a 12% increase versus last year. BEES Marketplace continued to scale with GMV from third party products increasing by 45% versus last year to reach $1.4 billion. Our digital D2C business is growing and enabling us to further monetize our ecosystem. Our digital platforms served 13 million consumers and generated $158 million in revenue. We are also commercializing third-party products on our D2C platforms and now have a growing marketplace with annualized GMV of $200 million.
Michel Doukeris: With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimize our business.
Fernando Tennenbaum: Thank you, Michel. I will take a few minutes to discuss the progress we have made on three areas in optimizing our business: superior profitability, compounding EPS growth, and increased capital allocation flexibility. Let's start with superior profitability. Our margins are best in class, reflecting the fundamental strengths of our business: our brands, scale, leadership positions, efficient operating model, and ownership culture. Discipline, revenue, and cost management enable us to offset commodity cost headwinds and maintain our margins while we are stepping up investment in key mega platforms this year. Over the last 12 months, we have invested $8.1 billion in sales and marketing to support our growth priorities as we move into the next phase of our strategy. While each year has unique dynamics, we are confident we have opportunities for further margin expansion over time. Moving on to EPS.
Fernando Tennenbaum: Top-line growth, effective cost management, and the continued optimization of our business drove constant currency EPS growth of 13.9%. With translational effect tailwinds, dollar EPS increased by 22.4% to reach $1.21 per share. We have a strong balance sheet. Given the proactive management of our bond portfolio, our last 12 months free cash flow is greater than any of our annual bond maturities, putting us in a position where we have no relevant refinancing needs. 98% of our debt is fixed rate with an average coupon of around 4%, and there are no financial covenants on our bonds. Given the strength of our balance sheet and free cash flow generation, we have increased flexibility on our capital allocation choices. The objective for capital allocation framework is to maximize value creation for our shareholders.
Fernando Tennenbaum: Consistent with our ambition for a progressive dividend over time, we have announced an interim dividend of 40 euro cents per share compared to an interim dividend of 15 euro cents per share last year. We also continue to execute on the 24-month, $6 billion share buyback program announced last year. To date, we have repurchased $2.6 billion of shares. Looking ahead, the strength of our ownership culture and execution, together with our best-in-class brands and solid year-to-date results, reinforce our confidence in our ability to deliver our 2026 outlook. With that, I will hand it back to Michel for some final comments.
Michel Doukeris: Thanks, Fernando. Before opening for Q&A, let me recap on our performance this quarter and the opportunities we have ahead of us. Our continued momentum reflects the resilience of our strategy and our ability to deliver reliable compounding growth across different operating environments. We continue to invest to strengthen our capabilities and brand power to lead and grow the category. Revenue grew by 4.9% with continued volume growth and a revenue per hectolitre increase of 4.2%. Underlying EPS momentum continued, increasing by 22% in both the Q3 and year to date. With our strong balance sheet and increased capital allocation flexibility, we announced an interim dividend of 40 euro cents per share. As we progress through the next phase of our strategy, we are well-positioned to deliver superior value creation. With that, I will hand it back to the operator for the Q&A.
Operator: Thank you. The floor is now open for questions. In the interest of time, we will limit participants to one question and one follow-up question. Again, if you have a question or comment, please press star one on your touch-tone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. We do ask that while you pose your question, you pick up your handset to provide optimal sound quality. Thank you. Our first questions are coming from the line of Edward Mundy with Jefferies. Please proceed with your question.
Edward Mundy: Morning, Michel, Fernando. My first question is a pretty big-picture question, if that's okay. In 2026, you've got a pretty healthy balance between volumes, price, and mix, and the replicable growth drivers are clearly working. I am not looking for explicit guidance for 2027, but how are you thinking about those three buckets going into next year, especially as there is a bit more commodity pressure sort of creeping in? My follow-up question is really around non-alcohol, which accelerated in the quarter. What is it do you think you're doing differently relative to your peers that's driving this outperformance, and do you really feel like you're at the tipping point now where zero alcohol can really scale and become a meaningful growth engine?
Michel Doukeris: Morning, Ed. Michel here. How are you doing? Two questions there. I think that they interconnect in a way. I think you mentioned, and just to reinforce that, we are not providing any guidance so far for 2027. During the Capital Markets Day, we talked about this midterm outlook evolving from EBITDA 4% to 8%, to become EBIT 5% to 9%, as we now get into what we call the second phase of our 10-year plan. As we look at the components of the results this year to date, now nine months gone, volume is growing. Very healthy net revenue per hectolitre. Of course, it comes from two different areas. We've been pricing, as we always do, in line with inflation, and our revenue management capabilities, which we discussed during the Capital Markets Day, is something that we are investing a lot.
Michel Doukeris: They continue to evolve, and due to the strong brands that we have and the capabilities that we have, we are topping up what we put in terms of price with very healthy mix. Mix that's coming from premiumization, right pack price strategy, and also from the growth engines that refer to, because no alcohol is at a premium margins for us. Ready-to-drink beverages, higher price per hectolitre, incremental net revenue there. We continue to, of course, in a very detailed way, using all the tech capabilities that we have to optimize the way that we promote, discount, and go to market. As we look forward, these type of algorithms, which is positive volume, healthy net revenue per hectolitre, gains in mix, optimization of the cost lines, and the right growth engines is what we anticipate will drive our momentum moving forward.
Michel Doukeris: On the no alcohol, I think that we have been investing on this now for 5 years, and we have been very clear on why we are investing. The key reason is because it brings new consumers to the category, and we are seeing today participation for our overall portfolio growing globally across the vast majority of the markets. It brings new occasions because it is very flexible as a liquid. It can be during the day, during the night, weekend, weekday, and it covers a very wide range of consumers, from LDAs to adults that want to continue to entertain, enjoying beer, but want to try, in some occasions, non-alcohol beer. What we are doing, I think that it is investing in the right brands and platforms. You remember we made a massive investment with the Olympics. Our technology for the liquids is huge breakthrough.
Michel Doukeris: Today, the taste and the quality of the liquids that we are putting in the market is second to none, and the best that we have had so far, but we do not stop investing in fine-tune the technology and improve taste and quality. This, of course, is getting traction. Used to be less than 1% of our business. Today, is more than 1.5%, approaching 2% on a run rate. The growth rates are very good across the globe, double digits in most every market. We are taking leadership on this segment in many markets, but now we are stretching this leadership up, and we see this continue to grow. It is very early stage. We will continue to see more coming there. I think that the third component on this question, on the same lines, is how we are leveraging the business beyond this growth.
Michel Doukeris: You just saw the EPS growth of 22%. I think that Fernando Tennenbaum can add a little bit on that because the optimizing the business is also a component on how this strategy is coming to life.
Fernando Tennenbaum: Thank you, Michel. Ed, you mentioned volume, price, and mix, but at the end of the day, it is all connected. We are investing more into our business. You saw sales and marketing. We are investing behind the mega platforms and doing all of that while managing to maintain the EBITDA margins. When you start going below the line, all the things that we have been doing, this, for example, you are improving cash flow. Improving cash flow, you have a higher average cash balance on your bank accounts. You have better interest income. That helps net interest income. Some of the different mix of countries that are performing, we see Middle America's very strong performance. Just to give some examples, countries like Peru or Colombia, they are bigger than China today, and they come with a higher EBITDA margin and very good profitability.
Fernando Tennenbaum: When you start adding all these components, we make sure that we are investing enough to support the strategy. Top line is in a healthy place. Price is in a healthy place because we are investing behind our brands. Then you have a lot of leverage through your P&L. Then you can deliver a solid EPS.
Michel Doukeris: Of course, this year you had some tailwinds from FX on your EPS. But even without the FX, we are growing at 13.9% at constant currency, which tells a lot about the efforts that we are doing to optimize our business. Then again, we seize the opportunity to do more as we continue to delever, as we continue to further optimize our business. Thank you, Ed.
Operator: Thank you. Our next question comes from the line of Sanjeet Aujla with UBS. Please proceed with your questions.
Sanjeet Aujla: Hey, Michel, Fernando. A couple from me, please. I would like to dig into China a little bit. I think on the call, Michel, you referenced the category down low teens in your footprint. Can you help us disaggregate how much of that is weather-related versus underlying consumer? Do you think the destocking will be done by the end of this fiscal year? That is my first question. My second question is on the strength of Middle Americas. You saw a nice acceleration there in Q3. I think the whole region is on track to deliver the strongest volume growth outside of COVID in the last decade. I am just trying to understand how material is the World Cup impact there in the quarter versus what is just an underlying strong consumer backdrop. Thanks.
Michel Doukeris: Morning, Sanjeet. Thanks for the question. Two very different parts of the world there in terms of not only geography but momentum for the category and for our business. I will start with China. When you look at the results in China, one can take this in a way that is very hard to understand, like 16% volume down. But when you dig into the numbers, and we have several sources to check these numbers in China, and one, we always say that the sources do not align 100% always, but you have production, you have production reported by the companies, which is different from the statistic bureau, and you have Nielsen. I think that they all converge on Q3 to an industry that is high single digits down at national average. So depending on the source, between 8% and 9% down for the industry.
Michel Doukeris: When you take this industry on our footprint, because again, we are more in the east coast of China, expanding inland, in a faster way now, but still very concentrated. We were very exposed to all this incredibly bad weather that landed in China and in the region over the summer. So our footprint, considering the channels, geographies, and the overall industry, was north of 10% down. So in this context, our performance, if you look through the quarters, just as an example, Q1, the industry was flattish. It was not too different in Q3 than what it was in Q1 in relative terms performance.
Michel Doukeris: If you go to the share, was actually better because we started the year with a negative market share, one point something down, and this share is getting closer to zero as we go through the months and was below half percent in Q3. So the actions that we have in place in China in innovation, the investments that we are making on the key brands, being on the brand equity, power is growing, but also in distribution. Distribution is in good place, evolving. They are working. We are growing, in the O2O channel. We are growing with the key innovations that we did in brands and packs, but the industry was really the big deal. You are right on your question because take any market of ours where you have wholesalers, more than one tier like China, and the retailers after the wholesalers.
Michel Doukeris: When you get on the summer a 10% industry down, you are confronted with a choice that is not easy many times, which is you either leave your channels stuffed and then with too much inventory, as you had towards the winter on an industry that is very negative, or you need to adjust your inventories, and a drop in the industry like 10% will push you to get inventories two to three days down in a month. You know that this is another big component on your shipments, which is, after all, what we report. So majority of the decline in China was industry and inventories driven, while we continue to underperform in sales to consumers, this industry that was very negative. I don't see a reason that is consumer-driven for this industry to be too bad in China. Again, you go through the quarters. Q1 was flat.
Michel Doukeris: Q2 was mid, like. Less than mid-single digits down was between 2% and 4%, depending on the sorts. Then on the Q3, we saw this big deceleration. We need to look more into the Q4 now and the comps for next year, because after all, it is hard to believe that something like this will repeat itself. We will need to continue to make the right investments and continue to make progress there on what we want to do. The inventory thing is a moving target, because if the industry is up, then you have, of course, a benefit on your inventory. If the industry is moving down, as you saw in the Q3, you need to adjust anyway. But we are planning, and we working very hard to get to the end of this year with normal inventories in China. That is our objective.
Michel Doukeris: So we can have a more clean-cut in everything that we do for next year. When you think about Mexico, I think this is just fantastic performance. We host our Capital Markets Day there 3 years ago, so we could give you a picture of how relevant this industry is and how exciting the opportunities that we had ahead of us were in Mexico. I am really happy to see how these opportunities are becoming not only reality, but the materiality of these opportunities are becoming even bigger than what we share over there. So I think that the team in Middle Americas, together with Jean Jereissati there, are doing a fantastic job. We saw participation growth across all the markets. We saw industry growth, the underlying trends that are driving that, such as the economy, the health of consumer, the LDA population, all play in our favor.
Michel Doukeris: This was boosted by a very good weather. You remember that we talked a lot about the bad weather last year in Mexico, so this year was the opposite of that. We had some tailwinds coming from the comps and the weather. Gaining share across majority of the markets where we have space in the beer share, and gaining share of total alcohol beverage in the markets where our share in beer is already very high. So the beer category is moving ahead of the other categories. What is driving that? Very consistent execution of our strategy. All the growth levers being non-alcohol, Beyond Beer, premium, are growing well ahead of the industry, and the growth was broad-based. So on an interesting way, the overall consumer environment in this region is better than the average at global level.
Michel Doukeris: The inflation there is moving on the opposite direction than what we see across the globe, especially in Europe, Asia, and North America. This is bringing a little bit more affordability to the category when you compare the disposable income to the prices that are moving with inflation. This is all supportive to the underlying momentum that we see in both the category and our brands. Thank you, Sanjeet. Thank you. Our next questions come from the line of Andrea Pistacchi with Bank of America. Please proceed with your question.
Andrea Pistacchi: Yes. Thank you. Hi, Michel, and hi, Fernando. My first question is on Brazil, please, where the industry, I think you said, grew mid-single digit in sell out based on Nielsen, and you gained share, but your beer volume was up 0.5%. Could you possibly help us bridge the gap here between sell in and sell out? With the comps becoming a bit more demanding going forward, how do you see the consumer and the industry environment evolving over the next few quarters with the elections also now behind? Then I will have a follow-up question for Fernando on the dividend, which you obviously increased the interim dividend quite meaningfully, as you said. Previously, I think you had indicated that dividend increases would likely be relatively gradual over time.
Andrea Pistacchi: Should we see today's increase mainly as a rebalancing between interim and final dividend, or does a stronger balance sheet give you say it gives you more options, but does it give you scope to accelerate the increase in the overall payout?
Fernando Tennenbaum: Hi, Andrea. Fernando here. Let me start by your second question, then I will move to Michel. On the dividend, we said before that we have this ambition to grow for a progressive dividend over time. We also said that our cash flow is skewed towards the second half of the year. You are right. With the strong balance sheets, now we have increased capital allocation flexibility. As business performing, you see our EPS continues to perform. We announced this interim dividend, which is EUR 0.40, which compares to EUR 0.15 in 2025. I think this is at end of day consistent with our stated ambition of a progressive dividend over time. Michel.
Michel Doukeris: Andrea, on Brazil, I think that is not that complicated to triangulate the numbers, but of course, it demands clarification on the sources in how we look at each of these components, right? You have in Brazil the Supply data, let us say, what goes out of the production in the breweries. When you look at this data, in the year to date, we are gaining share, and the industry is performing relatively well. Then I am not using the comps of last year here, but the year only. When you look at the sales to consumer data, Nielsen, the industry on the quarter was also relatively good. Perhaps one would say under expectations versus the comps last year. But the weather that impacted Brazil last year was not really much better this year.
Michel Doukeris: The economic situation in Brazil is still resilient, but is not one, at least on the middle of the year, that was supportive for the overall consumer and consumption power. In this environment, the difference between production shipments and sales to consumer is the way that people ship and control inventories through the channels and the comps. When you look at all of that, the underlying demand for the brands and the market share in the different sources is positive, is being driven by our premium brands that are growing well ahead the industry, but a very strong performance from the balanced choices portfolio that we have in the core. The market share is very healthy. Nielsen in production data also have a mismatch in terms of when you do the cut for the data.
Michel Doukeris: A little bit of the Nielsen Q3 data is skewed towards the FIFA World Cup period, and therefore in production would be more Q2 than Q3. At the end of the day, when you look at the accumulated of the 9 months and the cut only of the Q3 sales to consumer, they are both very healthy. I think that as we look to Q4 in Brazil, we will see a little bit of the consumer environment on your question improving, because you are aware that we had elections this year in Brazil in October, right at the first month of Q4. Usually during this period, there is more money into the economy. People received some of the adjustments in the salaries, in the benefits that go to the overall population.
Michel Doukeris: We are now phasing from the winter period towards the summer in Brazil, where if all the forecast is correct, we are going to have a little bit of the bounce back from the El Niño that was more on the negative side from H2 last year to H2 this year. That should be a little bit of an inversion now as we go to the summer in Brazil. It is going to be a little bit hotter. It is going to be drier. We will see a little bit of better weather to the big regions in Brazil, especially, Southeast and the Northeast regions in Brazil that should benefit for our industry from better weather than what we saw last year.
Michel Doukeris: After that, we will need to see how the year ends and the next year starts to then measure how the consumer environment will be for next year. This is for Q3 and what we are seeing now as we phase from Q3 to Q4. Thank you.
Operator: Thank you. Our next question has come from the line of Robert Ottenstein with Evercore ISI. Please proceed with your questions.
Robert Ottenstein: Great. Thank you very much. My first question is on the cost outlook. It has changed a lot since the beginning of the year. So I was wondering if you could touch on the incremental pressures that you are seeing going into Q4 and 2027. And how comfortable are you that you have the operating levers to deal with that environment and still hit your medium-term guidance? Maybe touch on what actions you are doing now to meet those challenges. So that is the first question. The second question, a little bit longer term, is fairly recently you have added Michelob ULTRA to your global brands, and love to get a sense of a little bit more detail on the strategy there, what kind of traction you are seeing, and reasons to believe that Michelob ULTRA deserves to be a global brand and can make a meaningful difference to the top line longer term. Thank you.
Fernando Tennenbaum: Hi, Rob. Fernando here. I am going to take the first question. If you recall, in the beginning of the year, we said that we are always fully hedged on the things that we can hedge. There are things that we cannot hedge, and we should hedge that cost more skewed towards the H1 than the H2. Then on our update on the last earnings call, we said that the non-hedged piece, we saw some further pressure. So our expectation is for the cost to be more balanced between H1 and H2. And I think this is true then. So we are seeing, and this is what you saw in Q3, that costs were more balanced between H1 and H2.
Fernando Tennenbaum: Having said that, we have been proactive in our revenue and cost management agenda to make sure we balance it for stability, and I think our Q3 clearly shows that. When we look for next year, we are not providing any guidance or any outlook so far. But if you look at the current market prices and knowing that we have this 12-month hedging policy, so we are pretty much, not 100%, but almost fully hedged for next year, you have some sort of visibility, and it is looking like more of a normal year. More to be updated when we have the final hedge, but it is looking more like another normal year. With the levers that we have in revenue management, cost management, we should be able, once again, to continue being consistently delivering. We do not have an outlook for next year yet.
Fernando Tennenbaum: We are going to disclose the outlook for next year during our full year earnings in February, but so far looking more like another normal year.
Michel Doukeris: Robert, good morning. Michel here. On your question on the global brands strategy and more specifically Michelob ULTRA playing a role here, I think that one of the main things that we are doing, and we communicated a lot during the Capital Markets Day, is this idea of consistent compounding growth today while investing for the future. We are investing in very specific platforms that we call growth levers that are aligned with the consumer trends that we see that are both relevant but also global trends. One of these trends is what we call balanced choices. So consumers that love the category, that love the experiences around beer and want to do this regularly, more often, consistently, but they want to balance this with other choices and activities that they have.
Michel Doukeris: In this area, our portfolio has been growing way ahead of what we are growing on average or the industry is growing. This idea of low calories, low carbs, low sugar, and in some cases, as we said before, non-alcohol beers, they are leading this trend and reshaping, in a way, the way that the category interacts with consumers and the way that consumers see our category. Because after all, beer is very social, is very enjoyable, refreshing, and when you adapt the process and the formulation, you end up having less sugar, less calories, less carbs, less alcohol than other competing categories. In this sense, Michelob ULTRA is the most successful brand that we have in this portfolio. We don't need to talk here about the momentum in the US and how the brand became the number 1 brand, the fastest-growing.
Michel Doukeris: We started the expansion where it was very logical, Canada, Mexico, but we saw an unbelievable opportunity to invest and align this with our mega platforms during the FIFA World Cup, and we made the push for the Americas. So if you look at Q3, 60% of all the growth that the brand had globally came from outside of the US. So during the World Cup, we said it was 40%, this quarter it was 60%, which shows an acceleration and a long-term legacy that this investment will leave to the company because the brand across all markets outside the US is either core plus, as it is in the US, or it is even premium. So it's even more profitable on a relative basis than the price positioning that we have here. The momentum is huge.
Michel Doukeris: So you look at markets like Brazil, Argentina, Colombia, Mexico, the brand is doing very well in accelerating, and we are very confident that it's the right positioning, it's the right liquid. It has the right platforms. You just connected FIFA with NBA, that Michelob ULTRA sponsors, so you can talk about the benefits and the key assets of the brand year-long. It's a great brand, right at the center of a mega trend that is global for consumers. We are expanding now through Americas. This is working very well, and we will continue to do in a very organized and disciplined way, the expansion and the investments to grow this brand further. It's very incremental for our portfolio. Thank you for the question.
Operator: Thank you. Our next question has come from the line of Mitch Collett with Deutsche Bank. Please proceed with your question.
Mitch Collett: Hi, Michel. Hi, Fernando. My first question is for Fernando, I think. So Fernando, at the Q2 stage, you talked about a relatively balanced year in terms of EBITDA growth from H1 to H2. Is that still your expectation with just one quarter to go because it implies a step up in Q4. Can you talk about the puts and takes as you see it for Q4? I appreciate you just said that you expect COGS to be reasonably balanced. My second question is a broader question on pricing. One of your bigger competitors yesterday talked about taking pricing below CPI yesterday. I'm conscious that you've just said that it's going to be a relatively normal year for COGS, but ABI has always aimed for pricing to be roughly at CPI. Are you seeing any change in the industry pricing environment? Thank you.
Fernando Tennenbaum: Hi, Mitch, Fernando here. Just repeating what we said in Q1, we said that this year would be more or less balanced between H1 and H2. I think given what we are looking, the market still holds. Of course, we have puts and takes, but business is resilient. We continue to be proactive in revenue management and cost management, so it still holds.
Michel Doukeris: Hey, Mitch, Michel here. On the pricing part, I think that first and foremost, we stated this before, there is no change on our view that we price in line with CPI on average. We do this every year with a very simple calendar across the countries. When we do that, we are always assessing, as I always say, the different realities across markets because we want to price with the right discipline and carefully balance the consumer environment, the competitive environment, and the ability that our brands have to charge a higher price or a premium price in each and every market. We discussed a lot during the Capital Markets Day how much we are investing in capabilities, best-in-class capabilities, and one of these capabilities is revenue management. I could talk about this, but I think that the results, they speak louder than that.
Michel Doukeris: If you look at the year-to-date revenue per hectolitre is up 4.3%. If you look at the quarter, it was up 4.2%. We said that a portion of that is coming from healthy mix, which is part of our revenue management agenda. But the price part is robust and is earned given the quality and the investments we are making on our brands. They continue to grow participation, they continue to grow power, and of course, because of that, we earn the right for the premium price that we have in the markets, but also to follow inflation. While of course, not talking specifically about any competitor, the industry overall tends to price around inflation. I have said before, it is still the reality. If you look pre-COVID to post-COVID, the industry took a lot of costs and did not price it all into the price to consumer.
Michel Doukeris: The margins are not where they used to be or should be if you just go back to before COVID. It would be, I think, a little bit different to believe that the industry overall will continue to take more costs without passing on prices. But of course, for you to be able to keep up with inflation, you need to have the right capabilities, and in this case, revenue management capabilities. You need to have health brands, and you need to have these brands performing. Those two things, they come only with quality management and teams that have the experience and the ability to manage the brands and the business that they have. I cannot comment on the capabilities and the management teams of any other competitor, but we are very confident on what we are doing at ABI.
Michel Doukeris: We are going to keep up with our policy.
Operator: Thank you. Our next questions come from the line of Laurence Whyatt with Barclays. Please proceed with your questions.
Laurence Whyatt: Hi, Michel and Fernando. Thanks very much. A couple of questions from me as well, please. Firstly, you have had BeatBox for nearly a year now. I just wanted to check in on the progress against your expectations when you acquired that brand, how it has fitted into your wider portfolio, with of the Beyond Beer portfolio, and whether you think that portfolio is now sufficiently diverse to be able to deal with the continued growth in the Beyond Beer space, particularly in the US, but also in other markets. Secondly, I guess a bit more technical for Fernando. Just noticed the SG&A line in Asia Pacific was quite a bit lower as a percent of sales in this quarter. Wondering if you could just give any explanations.
Laurence Whyatt: Of course, that division had a few challenges this quarter, but is there any specific reason why the SG&A line was quite a bit lower? Thank you very much.
Michel Doukeris: Hey, Laurence. Michel here. Thanks for the question. BeatBox, if you would like follow how we do the integrations of the other brands being Cutwater, NÜTRL, and now BeatBox. After the acquisition, we always partner big time with the founders. They often stay in the business for many years with us. The idea of the year one of any integration is really a learning experience. We get together with the founders. We learn about the brand. We learn about the operations. We organize with them the integration of the key areas. We plan for what we call the year two full integration of the commercial plans. So BeatBox is going through the year one of the integration. Next year is the year where it is going to be fully integrated on the commercial plans, on the sell and resets with retailers.
Michel Doukeris: And probably will take the stage in the US on our meeting with our wholesalers, our SAMCOM, we call, and is going to, for sure, have a big push from the team because we have opportunities in distribution, household penetration, innovation, and probably pack and price that will be integrated into the commercial plans. I think that is going to be a good addition for next year. The integration so far is doing well. No surprises. The contribution that we are looking forward for next year is the big thing. I think that when you combine the portfolio that we have today in the US in Beyond Beer, is a fantastic portfolio that will allow us to interact with a broad-based group of consumers, cover very well channels and occasions. Because of that, we are very optimistic about continuing to grow and further strength our position on this segment.
Michel Doukeris: On Asia here, between Fernando Tennenbaum and I, please add on, Fernando, if you want. But a lot of our expenses in SG&A in Asia are variable with volumes. We have been, of course, because of the industry performance, adjusting this through the quarter. I think that is just linked to the overall industry performance because the expenses they follow, in a way, how much we sell, ship, and execute on the channels. I just think that is like per like.
Fernando Tennenbaum: Yeah. Just to add and then on top of that, there is always the ongoing overhead management that we always do try to be more efficient, but it was mostly driven by sales and marketing.
Operator: Thank you. Our final questions will come from the line of Olivier Nicolai with Goldman Sachs. Please proceed with your questions.
Olivier Nicolai: Hi. Good morning, Michel, Fernando, and Shaun. I got a follow-up and a question, but before I start, I was just wondering, what was the mix component within revenue per hectolitre in Q3? Is it similar to the 1% you had in H1? The questions are, on the follow-up, could we go back to the EBITDA decline that you had in the US in Q3, and how much of a drag was actually linked to the extra marketing investments related to the FIFA World Cup versus the input cost inflation and transportation cost that you mentioned? Lastly, on Brazil, taxation is apparently set to increase in February 2027, from what I have read. There is also an online gambling ban coming up.
Olivier Nicolai: I was just wondering, how do you assess those two elements and the potential impact on volume for both of them, and how much of a headwind has online gambling been historically in terms of share of wallet? Thank you.
Michel Doukeris: Morning, Olivier. That was a nice build-up on the last question. I will try to take the parts here if I can get all of them right. Okay? So mix. Very similar contribution. We do not disclose each and every quarter what is one thing, what is the other, but we are pricing roughly with inflation. In a way you can say that 25% to one third of the revenue per hectolitre is a contribution from mix of premiumization, mix of the right categories. Think about RTD, non-alcohol, and brands. Okay? So 25% to 30% is mix, 70%, around 70% is pure price rate. The EBITDA in the US, I think that we talked a lot about this during the call, and we even showed a little bit of this on the press release in the presentation. But delivery overall, very broad-based growth for the company. Very solid.
Michel Doukeris: We are investing on our next phase of the 10-year plan. So the US, as a host of FIFA, had costs linked to that mega platform, very important for the business globally, but also for the US. This cost is a big component on the Q3. But the US is also having costs related to unhedged commodities. The simplest one for you to understand is transportation because of oil, diesel costs, is a cycle of higher transportation costs on the US, which is not abnormal because every X years, the US has these cycles of higher costs in transportation. So I think we are in the middle of one. In this case, it is diesel oil driven. It is impacting the business because this is not 100% hedged in most of our geographies, especially in the US.
Michel Doukeris: But other than that, business normal course, gain share in total alcohol, gain share in beer, health growth from the key brands, leading growth in RTDs and in beer, and with number 1 and 2 brands in beer at this point. Costs from FIFA, marketing costs from transportation. When you think about Brazil, we talked a little bit about this overall consumer environment. It is stable, resilient, but it is not at the same pace of other Latin American countries. It is a little bit under pressure, and the pressure comes from inflation, interest rates, and there is always something else. I think that gambling was a big discussion in Brazil. It was biting into disposable income, especially for low-income consumers. It grew very fast and was impacting not only the debt that these consumers are carrying, but also their available income for consumption in general.
Michel Doukeris: It was not only beer, it was across all categories. I am not following this 100% close, but there was a ban on this gambling that came before the elections. People are trying to recover their money that was into these platforms, and I think that the overall speech that you listen Brazil is that was very important to recover disposable income and purchase power of the families, because it was a little bit out of control. Because of that, the government made the decision that they made. On the tax reform, still very early. Things are evolving. We continue to say that, of course, any efforts to simplify taxes in Brazil are welcome. The watch-out is that the tax burden in Brazil is very high. If you look at beer specifically, it is one of the highest tax burden globally. We are following.
Michel Doukeris: I think that, again, with the elections, there will be more money in the economy. With the gambling, if this is contained, there will be more disposable income. The tax reform is a watch-out, but it is still too early. The overall speech from the government is a neutral tax burden when you combine everything. If anything is beyond what it is the rate today, I would assume that the different categories and companies will need to price this into the final price to pay for that, and to keep their margins under control. There is more to come. I think that on the back end of the year, beginning of next year, if anything is more supportive from the consumer standpoint, giving the injection of money coming from the election, plus the control on gambling.
Michel Doukeris: The tax reform is going to be a chapter for us to discuss next year. Thanks for the questions.
Operator: Thank you. That was the final questions. If your question has not been answered, please feel free to contact the investor relations team. I will now turn the floor back over to Michel Doukeris for closing remarks.
Michel Doukeris: Thank you. Thank you, everyone. Thank you for your time today and ongoing partnership and support for the business. Do not forget to drink some beer. Cheers.
Operator: Thank you. This does conclude today's earnings conference call and webcast. Please disconnect your lines at this time, and have a wonderful day.
